Market Talk: How Green is my Valley?

Office Market

We asked several of the leading names in the property development business to assess Hungary’s green credentials when it comes to commercial real estate. Here are the thoughts of Nikolett Püschl, development and leasing manager at Atenor; Mihály Schrancz, development director at Property Market Ingatlanfejlesztő Kft., and Árpád Török, CEO of TriGranit.

Mihály Schrancz

BBJ: How “green” would you say the construction business is in Hungary now?

NP: The evolution of the Hungarian commercial real estate related construction business to be green started eight-to-ten years ago, and since then it has been continuously developing and beginning to drive the market. Green certifications are the future as 100% of the newly-built office buildings have green certification, most of them already by the design stage. So green and sustainable solutions have become basic criteria for a modern office building. Moreover, the role of green certificates will further grow in the future as it is a necessity to make a successful leasing or selling deal.

MS: Greener day-by-day. The huge construction companies who have office building references in Budapest have been aware of the requirements of sustainable construction for nearly a decade. Others, operating in the countryside or working on non-commercial projects are still facing challenges on this topic. As for the developers, the formula is about the same.

AT: Over the last few years, sustainability and green buildings have moved to the mainstream in the real estate industry, and today more than 30% of the whole Budapest modern office stock is certified green. While in the case of older buildings, the lack of a green certification is more common, each new office building delivered to the market nowadays has one of the three main green certificates: BREEAM, LEED or WELL. Constructing green is also a serious business aspect, as disregarding sustainability may lead to losing environmentally-conscious tenants or not gaining new ones. Although small- and medium-size clients may focus less on sustainability, there is a possibility that multinational companies will highly consider only certified buildings as potential headquarters. Neglecting sustainable aspects in the longer run may also negatively affect the exit, as investors are most probably looking for sustainable offices.  

Árpád Török

BBJ: How easy is it to be “green”, to build sustainably? Does location within Hungary have any effect on this?

NP: Being green was never easy. It is a question of thinking in the long-term, investing more money and taking responsibility. Of course it is more complicated and challenging, but fortunately developers have realized that this is the future of this market, and this is the future of the planet. The location of Hungary is good, it is easily accessible. Due to its good –and developing – infrastructure, I would say that yes, definitely the location and amenities of Hungary have an effect on this.

MS: To be green is a mindset, and if someone is determined to accomplish a green project, recently no special effort is required to reach the goal. The golden rule is that the earlier involvement of sustainable principles, the easier it is to create a successful green project. In the case of BudaPart, the green principles were declared in the master planning phase, and we are devoted to them.  

Location is crucial in Hungary: there’s a huge gap between Budapest and the rest of the country in terms of green thinking; however, multinational companies help to promote sustainable techniques all over the country.  

AT: Currently, not only due to tenant requirements, but to more restrictive energy efficiency regulations, new office buildings are subject to strict technical requirements and solutions, and they are built in a green way. In other worlds, each new office development is green nowadays. And this is and will be the future.  

Furthermore, due to EU regulation, buildings receiving an occupation permit after the end of 2020 will be subject to much stricter technical requirements, and as an effect, buildings will tend to reach zero commission.

Our Millennium Gardens development on the banks of the Danube is also constructed along these high technical standards. For example, as after 2021 at least 25% of a building’s whole energy consumption must be covered from renewable energy, Millennium Gardens’ whole cooling and the heating above 0ºC will be supplied by airborne heat pumps. The cost of reaching the mandatory renewable energy ratio at a building depends both on the built-up density and the plot size. The smaller the plot, the more expensive it will be to realize the required sustainability.

BBJ: Is this being driven by developers or the markets?

NP: Absolutely. Developers like Atenor have recognized the need and importance of sustainability. Therefore, from the beginning, Atenor has delivered real estate projects that meet very strict criteria in terms of location, diversification, technical quality and efficiency.

MS: It is definitely driven by the markets. In the case of commercial developments, building green is a “must have” for a developer, but building “truly green” is not yet paid for by the Budapest market.

AT: I would say both. Environmental-friendly construction can arise from cost-efficiency considerations, or from the aim to reduce greenhouse gas emissions, or also from the determination of tenants to be more environmentally aware. But, overall, market and client demands are the major forces driving green constructions.  

Nikolett Püschl

BBJ: What are the latest trends today in sustainability in the industry?

NP: About two-thirds of green certificated offices have BREEAM certificates, one-third of them have LEED certificates and some have chosen [German] DGNB system. Nowadays WELL certification, which is a tool for advancing health and well-being in buildings globally, is getting more and more popular. These international certificates are not only available for new buildings, but also help older properties improve their energy efficiency.

MS: The trend is to increasingly focus on the wellbeing of the users, beside or before the technical aspects. The latest green building assessment system, called the WELL Building Standard, proposes to change the way people think about buildings. It explores how design, operations and behaviors within the office building can be optimized to advance human health and well-being. BudaPart is following this trend.

AT: Apart from the compulsory green and sustainable solutions, like the overall energy consumption of the building or the usage of renewable energy, the standard features on the Hungarian market are tools that serve tenants’ and employees’ well-being needs, like relaxation areas on green roofs, bike storage, showers and changing rooms or e-car chargers.

BBJ: What might we see in five years’ time?

NP: More and more green buildings with newer and newer high-tech environment conscious solutions.

MS: Priority will be given to users’ wellbeing, for sure. It also seems that the pace and the severity of the climate change is accelerating rather than slowing down, therefore the measures of projects in the near future should reflect this. All developers should consider the realities of more extreme climate patterns, so we might create more climate change-resilient and adaptable buildings.

Viktor Nagy

BBJ: Are tenants really prepared to pay extra for green features?

NP: Yes. For most of the multinational tenants only newly built green certificated buildings are an option. These occupiers understand that being accommodated in a sustainable environment as the efficiencies of the technical specifications of these buildings are resulting in long-term benefits for them, for which they are definitely ready to pay more.

MS: Tenants are still not qualified enough in terms of sustainable features. They have low-key expectations, for example to work in a certified building, but they are still not willing to pay more for extra sustainable features.

AT: Although companies are more and more devoted to creating healthy working environments to keep and to get new employees, when it comes to realization, unfortunately the financial aspect often takes the lead. But the trend is positive, as tenants are open to pay more money for being green.

BBJ: Is there anything else you would like to add?

MS: Sustainability in a neighborhood-scale project as BudaPart is a more complex and interesting question. We use future-proof smart city solutions that help the buildings to interact with each other and, counter to a standalone sustainable building, our model will have a multiplicative effect in terms of sustainability.

Sustainability and Property Management

Not all the players on the market are developers, of course. We also asked Viktor Nagy, country manager operations Hungary for IMMOFINANZ, about the property management angle.

BBJ: What role does sustainability and “being green” play in the buildings that you manage?

VN: We are fully dedicated to environment protection. Almost all of our Hungarian office portfolio already has, or is proceeding with, the BREEAM “In-Use” certificate. IMMOFINANZ is committed to the responsible use of natural resources, the utilization of climate-friendly technologies, a systematic energy savings strategy, the refurbishment of building substance that is worth preserving and the construction of efficient new buildings. These central points reduce operating costs and emissions and also make an important contribution to environmental protection and tenant satisfaction. The goal is to continuously reduce the consumption of resources while maintaining or improving the quality of building use through energy savings measures and, in this way, realize energy savings and reduce environmental impact and risks.

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